Debt management plans (DMP) consolidate your short term debts into one monthly payment. They also negotiate lower interest rates, enabling you to pay off your accounts usually in less than five years. Before you sign up with one of these companies, you want to investigate them to be sure they are legitimate.

Services Offered

A DMP company, also called debt consolidation, handles the accounting side of your bills. They work with your lenders to lower interest rates, pay your accounts, and then close accounts when appropriate.

DMP are for short term debt, like credit cards and bills. They cannot reduce student or mortgage rates. However, you can reduce rates on these types of loans by refinancing them on your own.

With a DBP company, all you do is make one payment to them and provide your financial information. Part of your monthly payment will include a small fee for each account handled by the debt consolidation company.

Questions To Ask

Before you submit your financial information to a DMP, investigate the company. One important question to ask is how long will it take to pay off your accounts. A reputable company will ask for lenders’ names and account balances, but not account numbers to make an estimate.

They will then give you a specific date for each account. Since you have varying account balances, each account will have a different date. You should also know that rates are predetermined by creditors, so all DMP companies will get you the same low rate.

You should also ask about fees. Most companies charge a small fee for each account handled. Companies that require a large fee up front that is refundable in part are banking on the fact that most people do not follow through with these plans.

Other Credit Services

If you are not sure debt consolidation is for you, sign up for credit counseling. Through an appointment over the phone, internet, or in-person, you can work with a counselor to come up with a financial plan for debt payment. They may suggest a DMP or consolidation your credit into one loan, usually a second mortgage.

Would you purchase Fire Insurance on your home if it only covered a fire that started on a Monday morning?

Would you purchase collision on your brand new car that only covered ½ its value?

Almost everyone reading this would probably answer a definite “No” to both questions, in fact you wouldn’t go near a policy like that.

Yet thousands of Canadian workers think their Worksafe plan is sufficient coverage for long term disability.

According to the Council of Disability Awareness, less than 5% of disabling accidents or sickness are work related, which means these people are relying on a policy that does not cover them 95% of the time, yet you would think it was crazy if someone tried to sell you a home insurance product like that.

Then there are others that say “yes” to disability mortgage insurance yet never see a contract. You don’t know what is covered, definitions, exclusions, or length of policy. And now you have disability insurance that covers the mortgage payments (maybe), but what about the other half or two thirds of your income. The mortgage might be paid but you’ll starve to death in the mean time.

Accidents and illnesses are facts in life. They can happen to anyone at any time. And in a second, they can change your life forever.

Consider the following:

• Your chances of winning the Lotto 649 draw is 1 in 13.9 million
• Your chances of dying during your working career is 1 in 8
• Your chances of becoming disabled for 90 days or longer at least once prior to age 65 is 1 in 3
• The average length of a disability which lasts over 90 days is 2.9 years

So considering all of these stats and the fact that a long term disability is more likely to happen than anything else, and your ability to earn a living is the most valuable thing you own, why is it that hundreds of thousands of Canadians have either no insurance or rely on Worksafe or mortgage insurance as their plan?

It’s like your future is hidden behind one of three doors. Two of them lead to good health. The other leads to disability. Pick the wrong one and you loose. Are you willing to play the odds? Can you afford to let that happen?

Of course you can’t. The person who says he or she does not need disability insurance is the same person that says it’s not going to happen to them. You can’t take a holiday from work for 5 years. How do you think you would last with a sickness or injury that prevented you from working for the same length of time?

The solution is a personal plan that covers sickness or injury 24 hours a day, 7 days a week with no exclusions or hidden fine print. You’re insuring everything else, what about the machine that pays for those premiums?